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The Value of the Blood Profile A Brokerage Underwriter's Perspective

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					 Volume 20, No. 2         1988                                                                The Value of the Blood Profile




                             The Value of the Blood Profile
                          A Brokerage Underwriter’s Perspective
                                                       Robert J. Alcocer
                                            Senior Vice President -- Underwriting
                                       Sovereign Life Insurance Company of California
                                                      Santa Barbara, CA

                                                                  of the latest underwriting trends and tools available in the
When Dr. John Elder called on me to do an article on the
                                                                  risk evaluation process, inhibits the underwriter from doing
Blood Profile for this issue of the JIM, I spent the first five   the most cost-effective job possible.
minutes of our conversation explaining why I couldn’t, and
the next twenty minutes telling him what I thought were the       As I said in my conversation with John, I am now finally
advantages and disadvantages of the test, at least from my        getting around to the use and value of the SMA, or Blood
perspective as the head of an underwriting department whose       Profile, in today’s underwriting environment.
primary arena is in the brokerage marketplace. At the end
of my remarks to John, he very adroitly pointed out that          First and foremost, it is a tool. A relatively new tool which
J’d just done the article he was seeking. Under those cir-        we are all still learning to use. It is not a be-all, end-all
cumstances I could hardly continue to refuse. What follows        answer to our problems in risk evaluation. In fact, in some
then is a summary of that discussion. (If one can call Alcocer    instances, it can raise more questions than it answers. As
talking and Elder listening a discussion.)                        with any tool, we must learn to use it properly. And
                                                                  "properly" insofar as I am concerned, is still being defined.
I started by pointing out the uniqueness of the brokerage
marketplace, and the different level of pressure the brokerage    There is no question in my mind that the test is a valuable
underwriter faces (as opposed to his captive field force or       addition to our arsenal of weapons in fighting the risk
career-shop counterpart). While all underwriters have the         classification battle. Obviously, the Glycohemoglobin con-
basic goal to deliver profitable results, the brokerage under-    tributes greatly to the more accurate calssification of
writer’s task is made somewhat more challenging for a             diabetics and avoids, or confirms, the rating needed on cases
number of reasons. To begin with, and by definition, the          involving elevated glucose readings frequently obtained, in
brokerage underwriter deals with a non-captive field force.       isolation, for a variety of reasons.
Brokers have the ability to go to whomever they please. In
their eyes, the brokerage underwriter is only as good as the      The battery of Kidney Function studies are most helpful
results of the last case they submitted. Furthermore, the         when dealing with isolated, moderate amounts of
product of the brokerage company has been competitively           albuminuria and will often avoid the unnecessary (and
priced in order tobe a marketable commodity in that arena.        unpleasant) task of repeating specimen collections. In cases
This translates into aggressive mortality assumptions and         with known GU histories, their value is obvious.
compensation schedules, which further translates into thin
                                                                  The Lipid profile, i.e., Cholesterol, HDL Cholesterol and
profit margins. The brokerage underwriter’s margin for error
is further narrowed by one other factor. He (or she) must         Ratio and Triglycerides can also be helpful in evaluating risks
deal with a higher average face amount and therefore, a           from a cardiovascular viewpoint. One can adopt a position,
much narrower spread of risk. (At Sovereign Life, for             for example, that if all those tests are normal, one could
example, we have just over ten billion dollars in force and       Forego an EKG as a requirement on an amount only basis.
approximately 60,000 policyholders,in 1987 the average face       Furthermore, on those cases which have histories that
                                                                  suggest CV involvement, normal lipid studies, as with nor-
amount was a little over $210,000.) It, therefore, creates a
situation extremely sensitive to any type of fluctuation in       mal EKG’s can favorably influence the final decision. The
mortality. But on top of everything else, or in spite of the      reverse is also true. One is not going to react as favorably
foregoing, the brokerage underwriter is expected to main-         to a case involving a Cholesterol of 450, an HDL of 22, and
tain and implement a competitive, or liberal, or aggressive       Triglyceride of 400, with a history of non-specific chest
underwriting philosophy, while accurately classifying the         pains, even with a normal EKG, as if the panel were normal.
risk. How does one go about accomplishing this?
                                                                  But one should remember that in the brokerage marketplace,
                                                                  one cannot afford a knee jerk reaction .to profile results.
In my opinion, the brokerage underwriter must apply what          Abnormal values do not automatically a diagnosis make.
I refer to as the principle of the Three "C"s. That is to say,    In fact, I can think of no more appropriate comment than
in order to deliver the expected results, he (or she) must be
                                                                  one made by Charlie Will in his last issue of "Comment",
Competitive, Consistent and Contemporary. To be non-
                                                                  Volume IV, No. 12, April 1988.1 remember when a slightly
competitive means no business will be submitted, and if
                                                                  elevated Uric Acid was prima facie proof of gout, and thus
nothing is submitted, nothing can be issued and placed.
                                                                  called for a Table two rating. An example of a special test,
Being inconsistent can only produce inconsistent, and often
                                                                  unsupported by anything else, parlayed into a diagnosis."
disastrous, results. And not being contemporary, i.e., aware


~ 4O
Journal of Insurance Medicine                                                                               Volume 20, No. 2     1 !788




This comment, from my viewpoint, is most applicab!e to             As usual, in. both my conversation with John, and in my
the way the industry has reacted, and is reacting, to the liver    writing, I have digressed. Back to the main point as to the
function studies on the profile. When first presented,, eleva-     value of the Blood Profile from the brokerage perspective.
tions of the SGOT, SGPT and GGT were taken and touted              Its advantages far outweigh its shortcomings in terms of risk
as prima facie evidence of alcohol abuse. While that attitude      classification. It is cost effective, and properly used, should
still exists in many quarters, the pendulum now seems to           enable us to achieve even more accurate and more favorable
be swinging towards a more moderate, if uncertain, posi-           underwriting results.
tion. Now one can consider alcohol abuse as a possibility,
but if investigation into that area proves negative and is ruled   A measure of its cost effectiveness can perhaps be best
out, what does one do with the results which are still             exemplified by a conversation I recently had with Dr. Gary
elevated? Decline7 Postpone (same as decline)? Table D for         Graham, former Medical Director of Kemper and an early
Don’t Know7 Standard? (Subject to a letter of recom-               pioneer and advocate of Blood Profile testing. He cited this
mendation from the applicant’s pastor, or higher authority,        general example, based on Kemper’s experience:
if available.)
                                                                          Out of 1,000 medically examined cases, including
Obviously, there is no one hundred proof answer here.                     Blood Profiles, 50 will be declined or rated so as
                                                                          not taken.
Maybe all we can hope to accomplish is to possibly establish
the data base for future underwriters and actuaries to study.
                                                                     2. Declinations or ratings will most likely be broken down
But in order to establish that data base, we must insure most
                                                                        as to cause as follows:
of these people. Eventually, I’m sure we will. And it will
probably be a brokerage underwriter making the decision
                                                                          a. Elevated liver function tests ............40
to do so.
                                                                          b. Positive cocaine ......................             3
The use of the Blood Profile will undoubtedly change as we                c. Positive HIV/T-Cell Tests .............. 3
gain more experience with it. It will probably follow a path
                                                                          d. Other medical conditions .............. 4
similar to that of use of the EKG. In days gone by, EKG’s
                                                                             (i.e., Diabetes, GU disorders, etc.)
were only requested on large cases ($100,000 or more!I).
Abnormal EKG’s, almost regardless of the abnormality,
                                                                     3o   If one assumes an average size case of $100,000, the
were not treated very favorably (RBBB’s minimum D, usual-
                                                                          total amount declined or rated so as to be unplaceable,
ly H, LBBB’s minimum H, probably decline, etc.). We estab-                is $5,000,000. Obviously, not all these will result in
lished a data base. We began to differentiate between major
                                                                          death claims, but again if one assumes one death per
and minor types of changes. The exercise test was
                                                                          year from this group, the total claims equal $500,000
introduced, first in the form of the Double Masters                       during the select period alone.
(remember. thatT), then the Treadmill, then the Thallium,
and angiography all became available and understandable
                                                                          Assuming the examination costs, including the Blood
to us. In today’s underwriting environment, an "abnormal"                 Profile, average $100.00 per case, or $100,000 for that
EKG does riot automatically mean a rating or rejection. To
                                                                          block, the results are what Dr. Graham terms "Mor-
the experienced underwriter it poses a series of alternatives
                                                                          tality Profit" of $400,000.
in developing the case, depending on the nature of the
abnormality, history of the applicant and size of the case.
                                                                   A word of caution before we rush off and lower our blood
So it should be with the Blood Profile, the major difference
                                                                   limits even further. Dr. Graham’s position, however sound,
being that while we have established considerable experience
                                                                   deals with claims avoided. Unfortunately, actuaries only
with the EKG in its various forms, we are only in the early
                                                                   count claims incurred, and accountants only count dollars
stages of that process with the Blood Profile.                     paid, not saved, in compiling bottom line figures. These
                                                                   studies cost money and in today’s cost conscious environ-
Different opinions, based on different experiences, different      ment, one must make sure one is getting effective value for
interpretations and different results exist. Particularly in the   the price of the tool, particularly when, in light of the AIDs
grey areas. As we become more accustomed to dealing with           epidemic, we all seem to be rushing headlong into lower
the variety of situations posed by some of the results, we         testing limits.
will come closer to a consistency of action and approach.
But it is, as underwriting is, an evolutionary process.            Why not, for example, consider variations by age? Do we
                                                                   really need T-Cells and HIV’s on applicants 60 and over
Our primary function remains risk assessment. Risk,                when results show a positive ratio of only two in 10,0007
by definition, implies uncertainty. Uncertainty about things       Do we need cocaine screens over age 50 in states like Utah,
that human knowledge cannot certainly determine or that            the Dakotas, or Iowa, or any place else7 We must remember,
human power cannot certainly control. To put it another            our current products, mostly as the result of the Term Wars,
way, the insurance industry exists because of this uncer-          were not priced with the current acquisition cost level in
tainty. If we knew who was going to live and who was going         mind. An understated acquisition cost level can raise just
to die, the latter couldn’t get insurance, the former wouldn’t     as much havoc with profit margins as adverse mortality,
need it.                                                           and much more insidiously.


                                                                                                                               41 m
Volume 20, No. 2         1988                                                              The Value of the Blood Profile



The main point here, once again, is that as we gain more         and reason. Our greatest challenge is not that we could be
experience with the test and develop a broader data base,        replaced by machines or artificial intelligence systems, but
we’ll be better able to use it more cost effectively. We must,   rather that in today’s thinly margined market, accurate risk
however, continue to view it as a tool in transition.            appraisal has become more important than ever. The role
                                                                 of the underwriter should, therefore, correspondingly
Finally, all underwriters, not just those engaged in the         increase in value. The proper use and development of
brokerage area, should remain aware that of all the risk         tools like the Blood Profile should only serve to validate
assessment tools at their disposal, the most valuable and        that premise.
useful one remains their own mind and its ability to think

				
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